Business Finance - Peregrine Section
Review Exam ACTUAL QUESTIONS AND
CORRECT ANSWERS
A company's balance sheet shows the value of assets, liabilities, and stockholders' equity
_____.
A. for any given period of time
B. at a specific point in time
C. at the end of the fiscal year - CORRECT ANSWER B. at a specific point in time
Match the ratios to their ratio type.
A. Debt Ratios
B. Activity Ratios
C. Market Ratios
D. Liquidity Ratios
E. Profitability Ratios
Current Ratio & Quick (Acid Test) Ratio
Turnover ratios & Collection/Payment Period
Debt-to-Equity Ratio & Times Interest Earned (TIE)
Profit Margin & Return on Assets
Price/Earnings (P/E) Ratio & Market-to-Book Ratio - CORRECT ANSWER A. Debt
Ratios: Debt-to-Equity Ratio & Times Interest Earned (TIE)
, B. Activity Ratios: Turnover ratios & Collection/Payment Period
C. Market Ratios: Price/Earnings (P/E) Ratio & Market-to-Book Ratio
D. Liquidity Ratios: Current Ratio & Quick (Acid Test) Ratio
E. Profitability Ratios: Profit Margin & Return on Assets
Balance Sheet Assets - CORRECT ANSWER Cash and cash equivalents are assets
such as checking account balances at commercial banks that can be used directly as means of
payment.
Marketable securities represent liquid short-term investments, which financial analysts view
as a form of "near cash." They include Treasury notes, commercial paper, and others.
Accounts receivable represent the amount customers owe the firm from sales made on credit.
Inventories include raw materials, work in process (partially finished goods), and finished
goods held by the firm.
Intangible assets include items such as patents, trademarks, copyrights, or mineral rights
entitling the company to extract oil and gas on specific properties.
Gross property, plant, and equipment (PP&E) is the original cost of all real property,
structures, and long-lived equipment owned by the firm.
Net property, plant, and equipment is calculated as Gross PP&E less accumulated
depreciation - the cumulative expense recorded for the depreciation of fixed assets since their
purchase; this reflects a decline in the asset's economic value over time. The one fixed asset
that is not depreciated is land because it seldom declines in value.
Match the flow to its descriptor
Review Exam ACTUAL QUESTIONS AND
CORRECT ANSWERS
A company's balance sheet shows the value of assets, liabilities, and stockholders' equity
_____.
A. for any given period of time
B. at a specific point in time
C. at the end of the fiscal year - CORRECT ANSWER B. at a specific point in time
Match the ratios to their ratio type.
A. Debt Ratios
B. Activity Ratios
C. Market Ratios
D. Liquidity Ratios
E. Profitability Ratios
Current Ratio & Quick (Acid Test) Ratio
Turnover ratios & Collection/Payment Period
Debt-to-Equity Ratio & Times Interest Earned (TIE)
Profit Margin & Return on Assets
Price/Earnings (P/E) Ratio & Market-to-Book Ratio - CORRECT ANSWER A. Debt
Ratios: Debt-to-Equity Ratio & Times Interest Earned (TIE)
, B. Activity Ratios: Turnover ratios & Collection/Payment Period
C. Market Ratios: Price/Earnings (P/E) Ratio & Market-to-Book Ratio
D. Liquidity Ratios: Current Ratio & Quick (Acid Test) Ratio
E. Profitability Ratios: Profit Margin & Return on Assets
Balance Sheet Assets - CORRECT ANSWER Cash and cash equivalents are assets
such as checking account balances at commercial banks that can be used directly as means of
payment.
Marketable securities represent liquid short-term investments, which financial analysts view
as a form of "near cash." They include Treasury notes, commercial paper, and others.
Accounts receivable represent the amount customers owe the firm from sales made on credit.
Inventories include raw materials, work in process (partially finished goods), and finished
goods held by the firm.
Intangible assets include items such as patents, trademarks, copyrights, or mineral rights
entitling the company to extract oil and gas on specific properties.
Gross property, plant, and equipment (PP&E) is the original cost of all real property,
structures, and long-lived equipment owned by the firm.
Net property, plant, and equipment is calculated as Gross PP&E less accumulated
depreciation - the cumulative expense recorded for the depreciation of fixed assets since their
purchase; this reflects a decline in the asset's economic value over time. The one fixed asset
that is not depreciated is land because it seldom declines in value.
Match the flow to its descriptor
